How do you deal with an owner that asks you to put money upfront in a bank account?

by a searcher from IESE Business School

7 years ago

I'm in advance discussion with an owner. We signed an NDA, he shared detailed financial information, I visited his offices, I visited some of his clients and we are starting to discuss price.

I sent him a LOI. The only thing missing in it is the price which we are currently discussing.

He says that two of his advisers said that I should put 15% of the amount upfront in a bank account.

Additionally, he says that if the deal falls apart, he should be compensated for his time and costs.

I am sure lots of you had to go through a similar situation. Anybody could share experiences and how they dealth with it? Best practices?

5 likes
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20 comments

searcher from University of Vermont

I have not read all the comments, but you might flip the tables and ask the seller for the same thing. In my personal experience, it is MUCH more common for sellers to flake out and not close than it is for us to do so.

3 years ago | like reply | 0 likes

intermediary from Algonquin College

We sell many businesses each month and always require the purchaser to put up a refundable deposit. If they can not write a check for the deposit they are unlikely to write the check at closing. The deposit is always refundable as we do not want to be involved in disputes between buyer and seller over fault. Our sellers are willing and able and we force them to finance part of the transaction in order to protect the buyer however no deposit-no deal.

5 years ago | like reply | 0 likes

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